With global technology stocks enjoying strong returns, the big question is whether another tech bubble is brewing? While some market analysts say ‘yes’, GERRIT SMIT, Head of Equity Management at Stonehage Fleming, has a different view.
“The returns being produced in the technology sector are based on real organic growth that is occurring right now; not on the prospect of future growth, which was the case during the dot.com bubble of 1997 to 2001.”
Smit says that many of the major technology businesses are creating significant free cash flow currently, which is funnelled to shareholders through successful reinvestment or through dividends. “This is an important cornerstone of prudent, successful investing. Without free cash flow, shareholders have more uncertainty of future returns.”
During the dot.com bubble the free cash flow yield on the S&P 500 technology sector was less than 2%. Currently that figure is 4.9%, a ratio of more than double. Furthermore, the 12 month forward P/E multiple in the dot.com bubble era was around 40, whereas now it is 19. “In both instances the valuations are half as expensive now as they were then.”
In addition to strong free cash flow, Smit sees strong, sustainable, organic growth potential in many technology stocks, notably large-cap counters. This is the second reason that Stonehage Fleming’s Global Best Ideas Equity Fund, which Smit manages, is nearly 30% invested in major cash generating technology companies.
In the current technology world, the focus is on big data and getting information as fast as possible to as many as possible all over the world through smart mobile devices. While Apple recently launched its new smartphone with a price tag of US$999, both India and China are producing models with comparable technology priced around US$100. This is making mobile technology and its many benefits accessible to more individuals than ever before, creating a sustainable growth path for well-managed companies that distribute their products through mobile technology.
In the technology sector the clear way to monitor whether a company remains to be relevant is to follow its organic revenue growth. If this doesn’t come through consistently, it implies that their technology is falling out of favour and the business may be in process of becoming extinct.
In terms of individual technology stocks, the fund has positions in, Visa, Tencent, Alphabet, Accenture and PayPal. “Tencent is one of the world’s most successful technology companies,” Smit says.
Using the metric of organic growth as a benchmark, Tencent reported in their last earnings announcement that their revenue line grew by over 50%. In addition, their compounded free cash flow growth over the past four years was over 33% per annum.
Smit says Tencent’s strength lies in having a number of different earnings drivers. Its social network business WeChat alone has over 900 million active users. Both a social media and messaging app, WeChat is also used for mobile e-commerce, payments, ordering food, taxis and more. Furthermore, Tencent has a stake in JD.com, China’s version of Amazon, and in Didi, the country’s version of Uber. “Importantly, we are also comfortable with Tencent’s overall corporate governance,” Smit says.
Turning to Visa, Smit says this technology giant supplies the platform on which all Visa transactions globally occur. Its growth potential is based on the fact that payments, whether consumer, corporate or institutional, occur more and more online. The mushrooming of e-commerce is adding further fuel to the company’s growth potential.
Alphabet is another outstanding business, Smit says. As the holding company of Google, Android and YouTube, it is also very active in AI, driverless cars and satellite communications; Alphabet’s free cash flow growth has exceeded 17% per annum over the last four years.
Recently, assets under management (AUM) in the Stonehage Fleming Global Best Ideas Equity Fund passed the US$650 million mark. The fund, which attracts investments from private, professional and institutional investors has returned 47.2%* over the last four years, compared to MSCI World All Countries Index of 39.0%.
Smit runs this concentrated, high conviction portfolio of 24 stocks that are chosen for their sustainable growth potential, strong management, strategic competitive edge and attractive valuation. The portfolio has very low turnover: over the past 12 months Gerrit has only sold two positions and initiated one.
In addition to the high weighting in technology stocks, other investments include some of the world’s best known companies such as Nestle, Estée Lauder and PepsiCo where there is confidence in the sustainability for indefinite growth rather than volatile cyclical growth.
Huawei goes ultra-premium
Porsche Design and Huawei have launched the Porsche Design Huawei Mate RS in South Africa exclusive to MTN and retailing for R 26 459.
The Porsche Design Huawei Mate RS boasts features like the world’s first dual fingerprint design, including an in-screen fingerprint sensor, the world’s first Artificial Intelligence (AI) processor and Leica triple camera with 40MP image capture.
“After the overwhelming success of the Porsche Design Huawei Mate 10 Pro in South Africa, we now bring you our latest offering, a perfect blend of innovation in a smartphone and luxury design,” said Likun Zhao, Vice President of Huawei Consumer Business Group Southern Africa. “From three-point security feature including facial recognition, rear fingerprint scanner and the new innovative in-screen fingerprint to the Leica triple camera system. it culminates in an unprecedented experience for our customers.”
The device incorporates Porsche Design’s signature design language and Huawei’s breakthrough technology. The phone has a 6” 2K curved OLED screen and symmetrical look, minimalist feel and 8-edged 3D curved glass body.
High performance is symbolised by the naming of the smartphone: the term “RS” in the world of Porsche motorsport stands for outstanding racing performance.
Huawei provided the following information on The Porsche Design Huawei Mate RS benefits and features :
· The world’s first dual fingerprint scanner for enhanced convenience, allowing users to wake and unlock the device simply, thanks to an in-screen fingerprint sensor. Hover to wake the device, touch to unlock it
· The winning combination of Leica triple camera with 40MP RGB sensor technology and exceptional photography powered by Master AI. This combination puts effortless, eye-catching photography at the fingertips of those looking to immortalise their favourite moments. Combined with 5 x hybrid zoom, and the world’s first AI image stabilisation on a smartphone camera ensures photography lovers can capture the best shots with exceptional clarity in almost any situation
· The Porsche Design Huawei Mate RS is the first Huawei handset to allow quick wireless charging, making it even easier to keep the phone topped up and ready to go and, thanks to its long lasting battery, users will easily be powered through the busiest of days
· An ‘intelligent’ smartphone, the powerful AI processor automatically tailors the performance of the phone according to how it is used – constantly learning, understanding and anticipating needs, it is the perfect personal assistant for the pocket
· 256GB of internal storage means those constantly on the go and constantly on their phone can be worry free
· Dual SLS (super linear system) speakers with DOLBY ATMOS enable users to have a superior experience, with the best immersive surround sound and entertainment on the go
· Splash, water and dust resistant, which means there is no need to worry about damaging the device in the rain or accidentally dropping it in water
Jan Becker, CEO Porsche Design Group, said: “Both Porsche Design and Huawei seek to imagine and develop products that stand for precision and perfection, intelligent functionality and highly sophisticated design. Our aim was to create an outstanding device that goes one step further. We believe we have reached this goal by taking our partnership to the next level.”
Porsche Design and Huawei have worked in tandem to develop a smartphone that fuses together the two brands’ DNA, wealth of experience in design and technology, industry-leading expertise and exceptional performance. Through the use of colour in the device’s body, software themes and accessories, the new handset is accentuated with Porsche Design’s distinguished aesthetic and purist, minimalist feel.
The Porsche Design Huawei Mate RS will be available to purchase exclusively from MTN at R 26 459.
Cross-channel chat launched
Clickatell has launched a cross-channel live chat service, Touch Go, that transforms omni-channel customer care.
It enables live chat across a company’s website as well as social platforms (Twitter and Facebook) and mobile apps, bringing customer care and engagement into a single business platform.
“Today’s consumers expect to engage with your brand on the digital channel of their choosing,” says Deon van Heerden, Clickatell Engage CEO and Group CFO. “They want to message your business and instantly have queries resolved, find the information and services they are looking for, without the need for a voice call. Clickatell’s Touch Go makes that happen with the right level of capabilities for businesses of all sizes.”
Businesses can start using Touch Go immediately, with a free Starter option. Touch Go requires no credit card for sign-up and is fully featured with a simple setup process. It offers customisable branding, a unified chat desk business application as well as reports and analytics.
As the business scales up its digital customer care, it can opt-in for the Touch Enterprise offering. Touch Enterprise is designed for scaling up customer care efforts through advanced capabilities including AI driven virtual agents, sentiment analysis, automated workflows, enterprise integrations and in-channel mini-applications.
“Customer care has become a defining factor for sustained business success ” says Nirmal Nair, Clickatell Engage EVP Product & Marketing. “In an ever-increasing mobile native world, customers often choose to interact digitally, but they also expect to be able to reach a human immediately, should they need. Monitoring multiple channels and providing immediate action becomes challenging with siloed deployments. Touch’s unified solution allows businesses of all sizes to provide the customer delight in a simple modular approach.”